For its fourth straight year, ExecutiveBiz brings you its annual list of Ten CFOs to Watch in Government Contracting. In an environment of increased competition, coupled with more frequent calls for cost-cutting measures on the part of government, it’s now incumbent upon every CFO to identify risks — and strategies — while strengthening lead infrastructure. In this high stakes environment, there will be winners and losers over the coming year. ExecutiveBiz is placing its bets that the 10 CFOs featured below will be among the winners. This year brings a list of CFOs representing an eclectic range of companies, from new players to long-time fixtures reaffirming their vision amid historic mergers and acquisitions. Check out their forecast for the year ahead — and see where they’ll be taking their own companies over the course of 2010 and beyond.
Call it coincidence. But every company Michael Bolton has joined over the past decade has either gotten acquired or flexed its own purchasing power within three years. That’s true this go-round as well, with the expected acquisition of ACS by Xerox. “It’s been a change environment for sure,” says Bolton, CFO of ACS’ Government Solutions Group. “I really enjoy going places where I can make a difference and can work with a lot of talented people to improve and help a company grow,” he says. That’s been no easy task, especially over the last year as state and local customers experienced strong budget pressures. Still, Bolton helped guide ACS Government Solutions Group toward 8 percent growth. The company is now expected to see $1.9 billion this coming year.
2010 Forecast: “Federal, State and local government clients have been experiencing strong budget pressures for the last 12 months. I’m hopeful this will change by late summer or fall of 2010. It won’t be evenly spread across all clients; I think it will be on a state-by-state basis. We may even see the federal marketplace recover a little bit sooner. Regardless, you’ll start seeing a pent-up demand for services; you always need the subject matter experts that a company like ACS can bring to the table. I don’t see that ever going away.”
If your company’s looking to go public, Brian Clark’s the guy you call. In April 2006, Clark was brought onboard Stanley Associates, then a $285 million federal IT services contractor, to oversee its initial public offering. Seven months later, Stanley was listed on the New York Stock Exchange. The company has since tripled in size; its annual revenue now stands at over $850 million. Clark has helped Stanley reach other benchmarks, Sarbanes Oxley compliance among them — that was achieved a year ahead of schedule. Like any company undergoing rapid growth, maintaining a nimble infrastructure has been key, says Clark. The result? Stanley now holds industry-leading margins in the government services space for public companies.
2010 Forecast: “We’re faced with an environment that’s going to become increasingly pressured from a regulatory standpoint. While we’ve seen some improvement in the broader economy, there’s still a long way to go and uncertainties around the war, healthcare and unemployment will continue to weigh heavily on the Administration’s need to look for cost savings. Needless to say, there’s a lot that we as a company can’t control, so we will focus on what we can control—namely performing for our customers, and sound financial management. In these times of uncertainty, it’s important to be passionate about taking good care of your customers and your employees. In our business, they’re our greatest assets and ultimately the most significant factor in driving our future success.”
For Marilyn Crouther, the past year brought more than its share of change. The company she’d worked for over the last 21 years, EDS, was acquired by Hewlett Packard. Under a new banner — HP Enterprise Services —Crouther has been busy continuing her role as U.S. public sector CFO for the organization. This isn’t the first time Crouther has been in the midst of rapid industry change. “Throughout my career, I’ve had the unique but challenging opportunity to work in areas where emerging technologies were driving dramatic changes in the industry.” For example, during the consolidation of the telecommunications, long distance and cellular companies, Crouther was instrumental in the execution of merger and acquisition strategies within the communications industry group. During the consolidation of healthcare payers and providers, Crouther was instrumental in the growth and new business strategies for the healthcare industry group. And now with the increased focus on cyber security and healthcare reform, public sector will be at the center of industry change.
2010 Forecast: “I’m optimistic we’ll start to see stabilization and focused spending in 2010. I believe there will be focused initiatives in the areas of federal healthcare and cyber security, as those are top priorities on the President’s agenda.”
Doing the right things. And doing things right. These two mottos have guided Bill Milligan in his seven years as chief financial officer of High Performance Technologies, Inc. That approach has paid off, particularly over the past year. At a time when the industry has been facing its share of critics, HPTi has been collecting nods. The American Business Ethics Award recently honored HPTi in its mid-sized business category. On the process improvement front, HPTi received the Medallion of Performance Excellence by the U.S. Senate Productivity and Quality Award for Virginia— the first company in Virginia to receive the distinction since 2006. Meanwhile, business is growing. HPTi recently captured one of its largest wins to date: a 10-year, $147 million contract for User Productivity Enhancement, Technology Transfer, and Training from the Department of Defense’s High Performance Computing Modernization Program Office. That’s 20 percent of HPTi’s business in one fell swoop.
2010 Forecast: “There are going to be a lot of issues in the defense area, with whatever happens in Iraq and Afghanistan. We still have the issue of the equipment refresh that has to happen. . Companies involved with equipment-related contracts are going to do well with the refresh. That has to affect the remaining budget which will increase competition for what’s left. At the same time, the administration is growing non-defense work; we and our competitors are going to follow the money.
The economy is still wobbling, but that’s not stopping Tom Mutryn from thinking big. “We’ve laid out two major financial goals,” says Mutryn, chief financial officer of CACI. “One is to continue to grow our organic revenue mid- to high single digits, the second is to grow our earnings per share double digits — 10-plus percent.” If past performance is any indication, Mutryn is well on his way. For the past seven quarters, Mutryn has steered the company toward double digit organic growth. Over the past year in particular, that growth has come, in part, from addressing investor concerns about the federal budget deficit, insourcing, and organizational conflict of interest. “We’ve been working closely with investors to explain how we’re well-positioned to weather these issues,” he says.
2010 Forecast: “The government services industry will continue to be a solid, viable business. That said, some macro issues are troubling: a very large deficit of $1.4 trillion deficit in government fiscal year 2009, probably a $1.5 trillion deficit in fiscal year 2010 — and trillion dollar deficits in years after — will clearly have implications on government spending and how the government allocates budget dollars. We can no longer count on the rising tide to lift all boats — some companies will outperform. The companies that outperform will be ones that have been tightly connected with their customers, doing mission critical work.”
Well before he was tapped CFO of SRA International in June 2009; Rick Nadeau had been a familiar face at the company. Back in 1988, Nadeau was an audit partner at Arthur Andersen, and, as fate would have it, his first client was SRA. “I served the company as its audit partner for 10 years,” says Nadeau. Along the way, Nadeau made his own career switch, from public accounting to chief financial officer. “I thought I would like to change chairs and be the buyer rather than the service provider,” he says. These days, as SRA’s CFO, Nadeau has been busy helping SRA build upon an already solid balance sheet. “This is an opportunity,” he says, “to build something extraordinary.”
2010 Forecast: “The U.S. economy will get better. It’s going to happen. The speed or how strong it comes back is a matter for economists to debate, but it will get better, and when it does, there will be more business opportunities and acquisition and financing transactions will again be a part of business reality. When that economic improvement does occur the smart companies will have their back office and processes as efficient as possible.”
How’s this for nimble: Vangent gets a call on a Wednesday. It’s from the Department of Transportation, and it’s about the Cash for Clunkers program. Thanks to the stimulus program, DOT is ready to process 400,000 vouchers for rebate credits to car dealerships. Only thing missing: manpower. That’s where Vangent comes in. By the following Monday, the company has already hired 2,000 people to do the work. “That’s a testament to how nimble we are,” says Jim Reagan, the company’s senior vice president and chief financial officer. Ever since coming on board the Arlington, Va.-based company in September, 2008, Reagan has been strengthening Vangent’s internal controls so it can more quickly seize opportunities across the U.S. federal government. All of which may push Vangent one step closer to a goal many industry insiders have been buzzing about: becoming a publicly-traded stock company over the next few years.
2010 Forecast: “We’re not going to see a big increase in the velocity of the contract award process. Many of our peers have indicated they’ve also found there wasn’t a big budget flush in September, at the end of the government fiscal year, and even since then it hasn’t picked up much. Part of it is the change of administration but it’s been almost a year now and things still haven’t picked up that much.”
It’s been a busy last few months for Noel Samuel. In November, Dell wrapped up its acquisition of Perot Systems. As vice president of finance for legacy Perot Systems’ government services division, Samuel has been helping smooth the integration ever since. This isn’t Samuel’s first time helping the business navigate change. In 2007, Samuel helped steer the acquisition of QSS. The largest acquisition by the legacy Perot Systems organization in its 21-year history, it effectively doubled the size of the government services unit overnight. Now, on the heels of Dell’s acquisition of Perot Systems, Samuel is putting systems in place to continue that growth trajectory.
2010 Forecast: “There are three broad areas that I think will be important to focus on. One is staying on top the technology curve: green IT, cloud computing, cyber security, virtualization, making sure these aren’t just buzzwords but tangible offerings. Second is understanding that while the market is still sluggish, leading competitors may see meaningful activity that yields between 6 to 8 percent top line growth. Finally, it’s looking at M&A activity. This is an attractive industry for enterers and acquirers to double down their bets. OCI may present opportunities, and larger organizations that have some conflicts of interest may look to divest pieces of business which could be desirable to certain organizations. ”
He’s been an investment banker. He’s started his own company and sold it. He’s been CFO of a few companies, too. What unites Dan Smith’s experience, across the board, is the ability to take an early stage company to the next level. Smith’s focus up until now has been non-federal businesses, everything from a psychiatric hospital he helped guide through a management buyout to a GPS technology firm he helped attain significant growth. Now, he’s bringing his entrepreneurial edge to government contracting. In August, Smith signed on as CFO of Eclat LLC, which grew out of assets purchased from BearingPoint’s bankruptcy. With financing wrapped up, Smith is busy focusing on the next goal: adopting policies and procedures for the company’s long-term growth while at the same time looking for the right acquisitions.
2010 Forecast: “As the recent public offering of GLOBAL Defense Technology & Systems shows, a lot of people are paying attention to our market from an investment perspective. We certainly saw a lot of rollup some years back, but I think people are back and saying this is a great market to invest in. While this may not be a high growth industry, it is a much more predictable one, and I think the market’s interested in that.”
Every executive has a defining moment. For Tom Weston it occurred mid-career. A company he was working at was about to be acquired. “On day one, new management came in with a thick manual, plopped it down on everyone’s desk, and said, ‘This is the way things get done,’” recalls Weston. It’s a tactic he’s vowed not to repeat in his current role as CFO of QinetiQ North America. Since coming on board in 2006 — he’d previously served as CFO of Apogen Technologies, then QinetiQ North America’s third acquisition — Weston has helped QinetiQ continue its growth both organically and through M&A activity. The company has since acquired 12 more firms, while growing at an average 15 percent a year. The secret to that intergration, says Weston: Increasing the maturity level of the combined entity.
2010 Forecast: “The near-term challenge will be centered on recruitment and retention of high-quality employees to drive business. Secondarily, it’ll be essential to enhance offerings and capabilities in areas with long-term demand. Federal deficit spending has to come down; the US government will not continue to spend the way it has been. When that happens decisions will have to be made — there will be winners and losers. The trick will be to figure out what products and services customers will demand in three, five and 10 years — and to build capabilities that respond to those demands.”